Indeed, the era of relying on a central authority to run a financial transaction seems to be over. Thanks to the Decentralized Market System of the Crypto Market.
All businesses that run on such decentralized model are now collectively referred to as Decentralised Finance (or DeFi, for short). These include:
Lending services Savings services
Derivatives Trading
Asset management Payment solutions
Insurance services Infrastructure
Financial analytics Financial Records
DeFi is the opposite of the traditional financial system regulated by government, banks, and other central authorities. DeFi is the future of financial transactions. It promises equitability and affordability for all classes and races, making the world a small village where everyone is a stakeholder.
Of course, not everyone will like this idea. Those who are big beneficiaries of the lopsided present centralized financial system will spare no effort to kill the DeFi dream. Banks and such centralized institutions are becoming jittery with the rapid growth and the large-scale adoption of DeFi. But there is no need to be fearful.
Change is a constant thing. It requires each person to position himself to be able to reap from the change, which is why you are studying in the SOC.
Lecture 1.0.0. Seven Characteristics of DeFi
Indeed, DeFi promises a radical transformation of our present financial system. Consider the following seven characteristics of DeFi and you will understand the reason for this:
• Decentralized
Financial records of transactions are kept and maintained on a blockchain so that they are simultaneously held across multiple thousands of computers, instead of a central server. This means no one can cheat the system.
• Transparent
Because all transactions are publicly auditable, transparency is upheld.
• Trustless
No central authority is required to ensure a valid transaction, hence, it is trustless.
• Permissionless
DeFi permits everyone, no matter the race, sex, or socioeconomic status, to have access to financial services like raising capital, savings and investments, etc; therefore, it is permissionless.
• Censorship-Resistant
A third party cannot reverse or invalidate a user’s transaction; meaning DeFi is censorship-resistant.
• Programmable-innovative
DeFi allows for development of business programs upon programs, leading to more efficient processes. How much you can build upon and innovate on an existing program depends on how many ideas flow through your mind. It is, indeed, programmable innovative.
• Prompt
DeFi services are prompt; that is, fast and easily executable. Newer generations of blockchains allow transactions to be executed in micro-minutes. That is the age we are in.